Three Steps to a Mortgage Loan

I have a web page that explains the mortgage loan process and I thought it was comprehensive but I get at least one question a day about the loan process. Perhaps it is unclear because many things actually happen in parallel.

First of course, you should shop interest rates and find a local mortgage broker that you feel comfortable with, is experienced and reputable.

Application:

You go into the brokers/bankers office and you fill out a 1003 (loan application). You also bring copies of your bank statements, retirement accounts, 401ks, W2s and tax returns and what ever else the Loan Officer requested. The Loan Officer makes copies of the documentation and gives you back your originals.

An application can be filled out on line but I don't recommend you do that. Completing an On Line Application is acceptable only IF the company is local and you know them or have spoken on the phone. This can save you a trip to the office. But you should never just fill out an application on line if you don't know who they are or if they are not local (even if they are a major branded company). Do not complete any request that suggest multiple offers as these companies sell your information over and over.

During the time you sit with the loan officer he will review your documentation and with most companies he will pull your credit report while you are with him.

During your conversation the LO will tell you "based on the information he has" that you qualify for "this type" of loan. He should also at this time tell you about all loan types you qualify for. He will also discuss interest rates and terms. He will have you sign several disclosures.

At this point you guys decide on your course of action. HE SHOULD AT THIS TIME GIVE YOU A GOOD FAITH ESTIMATE. The LO then puts all your official paper work in the file and turns it over to the processor.

Processing:

The processor makes sure all the documents are in the file, puts the paperwork in order, enters it into DU or LP (automated systems) and then receives an automated approval or turn down. This is always "subject to" supporting documentation including appraisal, inspections, and title work.

The processor then verifies employment, verifies residence, orders an appraisal, and orders a title. I'm not going to cover all the documentation needed but this is when everything starts happening at the same time.

When the processor has received all these verifications, the appraisal, and basic title work, they will review the file again and if it still qualifies they will forward the file to the lender's underwriter.

Note: At this point she does not have a title policy or guarantee, but the title company has reported that there are no clouds on the title. Shame on the processor if she forgot to order this because it can delay your loan later. The actual title policy is not issued until later when the underwriter gives a "clear to close".

Underwriting:

The lender's underwriter then reviews what is in the file, runs the numbers, and verifies that all of the documentation is present and that it supports the DU or LP approval.

They also review the appraisal and the title at this time. This is part of the underwriting process. If there are problems in the appraisal review or title they will address them to the processor.

The Processor contacts the LO, appraiser, or who ever is needed to close the open issues. This is part of the underwriting process. The processor collects the requested "stuff" and then forwards all information to the underwriter.

The underwriter is then happy and gives an "ok to close". This ok is usually subject to receiving the title insurance policy from the title company. The title company faxes or transmits electronically the info to the lender. Then the Lender sends the closing documents to the closing company. This can sometimes take two to three days.

You have an appointment to close. You sign the documents and your loan is closed and you get the keys.

Processing should only take a week after you have provided all the documentation requested. The underwriting normally takes about 14 to 28 days. This time includes communicating with the processor if there are any deficiencies.

Every loan file is different; each Lender has different requirements and markets vary, so it is impossible to give an exact duration for each step.

The Key: Understand the sequence and demand your loan officer gives you full details about what is going on. If you don't understand don't be afraid to say so. This is YOUR investment. Demand the facts. LO's sometimes use industry terminology, ask what they mean if you don't understand!